Increased Tenant Departures Cause Office Market Jitters.

THE Wilshire Center office submarket had a tough first quarter, losing more than 11,000 square feet of occupied space, a dramatic reversal from the more than 100,000 square feet absorbed there in the fourth quarter of 2000, according to Grubb & Ellis Co. And with all the talk of a downturn swirling through the economy, the lackluster performance is causing some concern, although not alarm.

"We lost some tenants last year," said Chris Runyen, associate vice president for Grubb & Ellis, referencing the 200,000 square feet that opened up in two buildings last quarter. "But the space is quickly absorbed."

Indeed, Wilshire Center's office vacancy rate bumped up only slightly from 16.3 percent at year-end 2000 to 16.5 percent today.

Still, the submarket showed improvement over the year-ago period, when the vacancy rate hovered around 20 percent and the average asking rent was at $1.28 per square foot, well below today's rate of $1.35.

"Overall, things were fairly quiet this (first) quarter, but there will be lots of deals to announce in the second quarter," Runyen said. "Tenants should look at signing long-term leases to lock in low lease rates."

Bob Safai of Madison Partners concurred. "The market was at a fever pitch last year, with huge leasing velocity. Now we're seeing that back off with the changing economy. Rates are dropping in primary locations, so people will migrate to first-choice locations because the space is available and affordable."

Paramount Plaza, at 3550 Wilshire Blvd., saw most of the activity in the Wilshire Center submarket during the first quarter. In one of the larger deals, law firm Stockwell, Harris, Widom & Woolverton leased 20,000 square feet for 10 years. Smaller deals included the American Communications Institute's lease of 8,000 square feet, and Napa-based Stonehedge Winery, leasing 2,000 square feet for its Southern California marketing and sales office. The terms of those deals were not disclosed.

Additionally, AIDS Project Los Angeles moved into two new facilities. The first, a 30,000-square-foot former dental clinic at Paramount Plaza, was a three-year deal at $1.10 per square foot. The second deal was for an 18,000-square-foot client services facility at 611 S. Kingsley Drive, which was leased for $1.25 per square foot.

The Wilshire Colonnade, at 3701 Wilshire Blvd., had Ticketmaster add 10,000 square feet to its existing 55,000, paying $1.25 per square foot. Elsewhere in the building, the Taipei Economic and Cultural Office rented an additional 18,000 square feet.

Bruce Geller, leasing manager for Insignia/ESG, said that Wilshire Center is still a little rough around the edges, "but the streetscape improvements and the business improvement district have helped keep the buildings full."

In investment activity, the Operating Engineers Pension Fund sold its 203,000-square-foot office tower at 3055 Wilshire to investor David Lee for $12 million, or $59 per square foot.

Farther west, the Miracle Mile/Park Mile stretch of the Wilshire Corridor tightened a touch in the first quarter, with its vacancy rate at 11.3 percent, down from 12.4 percent at year-end 2000. That remains looser, however, than the 10.1 percent vacancy rate a year ago. The average asking rental rate stayed flat at $2.45 per foot per month compared to the previous quarter, but is up from $2.22 a year ago. There was strength in absorption, with more than 85,000 feet filling up, a welcome reversal from the negative absorption of 148,000 square feet in the last quarter of 2000.

Much of the submarket's first-quarter activity was at 5670 Wilshire Blvd., where Edelman Public Relations took 15,000 square feet at $2.48 per square foot, World International Network leased 15,000 square feet at $2.50 per foot and the Israeli Consulate secured 13,500 square feet at $2.60. Over at 4929 Wilshire, marketing company Sylmark leased 9,000 square feet at $1.70 per square foot.

Expansion was the order of the quarter at 6500 Wilshire, where Dreyfus Brokerage Services signed a five-year, $2 million deal for an additional 11,000 square feet (adding to its current 40,000 square feet). Telemundo Television and J Walter Thompson Advertising each expanded by 4,000 square feet for undisclosed sums.

Wilshire Corridor

Major Events:

* Stockwell, Harris, Widom & Woolverton leased 20,000 square feet at Paramount Plaza.

* AIDS Project Los Angeles took 30,000 square feet at Paramount Plaza and 18,000 square feet at 611 S. Kingsley Drive.

* Ticketmaster added 10,000 square feet to its existing 55,000 square feet at the Wilshire Colonnade, 3701 Wilshire Blvd. Elsewhere in the building, the Taipei Economic and Cultural Office is expanding with an additional 18,000 square feet.

* Operating Engineers Pension Fund sold 3055 Wilshire to David Lee for $12 million.

* Edelman Public Relations took 15,000 square feet at 5670 Wilshire, as did World International Network. The Israeli Consulate secured 13,500 square feet at the building.

[Graph omitted]